Bulletproof Investing

CHAPTER 14Compound growth: the Eighth Wonder of the World

Albert Einstein, one of the world's most famous physicists and mathematicians, once described compound interest as the Eighth Wonder of the World, saying ‘he who understands it, earns it … he who doesn't, pays it’.

Warren Buffett, universally regarded as the most successful modern-day investor, concurs: ‘My wealth has come from a combination of living in America, some lucky genes and compound interest,’ he explained along his journey of amassing a net worth exceeding $87 billion. So, if there's one sure fire way to become a bulletproof investor, it's to grasp the genius of compound interest/growth.

At different stages throughout school and university, I learned the basic premise of compound growth. At that time, it didn't stand out or strike me as being overly significant. In terms of practical application to real life, it probably ranked alongside algebra — very low! However, Uncle John proclaimed compound interest as the most important concept to understand if you want to achieve financial success.

By this stage of my apprenticeship (I was about 21 at the time) it had become very clear I was never going to be able to save my way to financial independence. (Remember my sums: put aside 10 per cent of my pay packet for 192 years and I might get to where I want to go.) In that scenario, I feared the clock would beat me! But what if I could buy more than one property — that is, have multiple assets all increasing in value ...